Switzerland-headquartered phosphate miner EuroChem
details of its plans to expand production at its sites in
Kovdor, northwest Russia, and at other deposits across the
Speaking to IM during a visit to
the company’s Kovdorskiy apatite (phosphate), iron
ore and baddeleyite (zirconia) mine in Kovdor,
EuroChem’s mining director, Clark Bailey, said
that expanding the property will add about a decade to its
"With our new apatite-staffelite deposit, we have
around 10 years of production – and this production
more than replaces what we had been processing from the old
tailings [piled on top of the resource] which is now finished,"
Bailey told IM.
The apatite-staffelite plant is capable of adding
948,000 tpa apatite concentrate and 130,000 tpa iron ore
capacity to Kovdorskiy’s operations and will bring
the total annual apatite concentrate production capacity at the
site to 3.4m tpa by 2018.
Further developments at the site – which
would see an additional apatite-carbonatite section of the ore
body extracted from 2024, reaching full production in 2027
– will ultimately take EuroChem’s apatite
concentrate production capacity at Kovdorskiy to a projected
4.24m tpa, while iron ore capacity will increase to
approximately 7.75m tpa. These are respective increases on
2015’s capacity of 49% and 36%.
EuroChem purchased the Kovdorskiy open pit mine
and processing facility in 2002 and the site now produces 2.5m
tpa apatite concentrate, 5.6m tpa iron concentrate and 8,000
tpa baddeleyite concentrate, the last of these being used in
advanced ceramics, electronic ceramics, pigments and
The mine is currently 414 metres deep –
this can be sustained for another 460 metres until 2049 with
changes, when the company would be forced to switch to
underground mining methods. Borehole data demonstrate that the
vertical deposit goes down to more than 2,000 metres below
Baltic Sea level.
"To continue with the existing main open pit, we
will have to expand the pit edges to avoid steepening the walls
– that or go underground."
"Then, after the apatite-staffelite deposit, we
will be ready to process ore from yet another pit, which we
refer to as our apatite-carbonite pit, to continue to ramp up
and extend our production," Bailey said.
This pit edge expansion will cost the company
$104m in capex, not least because some of the
mine’s older buildings will need to be moved.
"Most of these changes would have been in our
upgrade and renovation programme in any case," said Bailey.
Processing facilities at
EuroChem’s Kovdorskiy mine,
the second largest producer of apatite concentrate in
James Sean Dickson, Flickr
Vertically integrated fertiliser
EuroChem’s CEO, Dmitry Strezhnev,
said: "The launch of the new processing plant at Kovdorskiy is
an important step in the group’s strategy towards
self-sufficiency and the further development of our vertically
integrated business model."
Integrated fertiliser production is currently
dominated by North American agrimineral majors, namely Potash
Corp. of Saskatchewan (PotashCorp.), Agrium Inc. and The Mosaic
Complex fertilisers contain a mixture of
components – with ingredients like phosphate, potash
and nitrogen or ammonia (NH3) all being mixed in
specific proportions for particular soil types. Producers of
one mineral that wish to enter the complex fertilisers market
then typically have to externally source the extra components
they do not produce themselves.
To supply its energy needs for the
energy-intensive process of nitrogen fixation for fertiliser
products, in early April 2015, EuroChem increased its internal
gas supply to 25% of its requirement through the purchase of
Astrakhan Oil and Gas Co. OAO, a Russian gas company, to ensure
costs could be tied down in what has been a volatile
hydrocarbons market in the last 10 years. This compares to its
75% self-sufficiency in phosphate.
Additionally, EuroChem is looking to enter the
equally disrupted potash market by opening its VolgaKaliy and
Usolskiy potash projects, located in Volgograd Oblast and Perm
Krai, as active mines. VolgaKaliy is on track to commence
production in 2017, for a total capacity of 8m tpa, or around
10% of global 2014 capacity.
Potash has been in an oversupply situation for at
least five years, however, with capacity expansions set to
increase the supply to demand ratio over the next five
Olivier Harvey, EuroChem’s head of
investor relations, said that EuroChem can beat the oversupply
situation because it is projected to sit on the far left of the
potash cost curve. Seeking customers in growth markets with
little internal production is important, he noted, singling out
Brazil and Latin America.
"We are aiming to be a top four potash producer,"
Harvey said. "We are also aiming to be among only four
companies to produce nitrogen, phosphates and potash."
"Some big mines across the industry are closing,
and replacement mines like Piccadilly, [owned by PotashCorp. in
New Brunswick, Canada,] are not making up for this," Bailey
Benefitting from lower
Despite the approximate halving of iron ore sales
prices over the last year, EuroChem is still making a profit on
its iron operation at Kovdorskiy, Harvey told
"You have to remember that, if anything, it is a
by-product of apatite production at Kovdorskiy, and a
by-product that can be sold to our advantage," Harvey said.
The price falls for potash that occurred after
the 2013 split of Russian potash producer Uralkali OAO from the
Belarusian Potash Co. (BPC) marketing agreement with
Belarus-based potash miner Belaruskali OAO – and
historically low phosphate prices – may even end up
benefiting EuroChem, Olivier said, owing to the potential for
higher-cost projects to be wound down.